International disputes:
involved in complex dispute with Brunei, China, Malaysia, the Philippines, and Vietnam over the Spratly Islands, and with China and the Philippines over Scarborough Reef; the 2002 "Declaration on the Conduct of Parties in the South China Sea" has eased tensions but falls short of a legally binding "code of conduct" desired by several of the disputants; Paracel Islands are occupied by China, but claimed by Taiwan and Vietnam; in 2003, China and Taiwan became more vocal in rejecting both Japan's claims to the uninhabited islands of the Senkaku-shoto (Diaoyu Tai) and Japan's unilaterally declared exclusive economic zone in the East China Sea where all parties engage in hydrocarbon prospecting.

Geography

The Republic of China today consists of the island of Taiwan, an island
100 mi (161 km) off the Asian mainland in the Pacific; two off-shore
islands, Kinmen (Quemoy) and Matsu; and the nearby islets of the
Pescadores chain. It is slightly larger than the combined areas of
Massachusetts and Connecticut.

Government

Multiparty democracy.

History

Taiwan was inhabited by aborigines of Malayan descent when Chinese from
the areas now designated as Fukien and Kwangtung began settling it in the
7th century, becoming the majority. The Portuguese explored the area in
1590, naming it “the Beautiful” (Formosa). In 1624 the Dutch
set up forts in the south, the Spanish in the north. The Dutch forced out
the Spanish in 1641 and controlled the island until 1661, when Chinese
general Koxinga took it over and established an independent kingdom. The
Manchus seized the island in 1683 and held it until 1895, when it passed
to Japan after the first Sino-Japanese War. Japan developed and exploited
Formosa. It was the target of heavy American bombing during World War II,
and at the close of the war the island was restored to China.

After the defeat of its armies on the mainland, the Nationalist
government of Generalissimo Chiang Kai-shek retreated to Taiwan in Dec.
1949. Chiang dominated the island, even though only 15% of the population
consisted of the 1949 immigrants, the Kuomintang. He maintained a
600,000-man army in the hope of eventually recovering the mainland.
Beijing viewed the Taiwanese government with suspicion and anger,
referring to Taiwan as a breakaway province of China.

The UN seat representing all of China was held by the Nationalists for
over two decades before being lost in Oct. 1971, when the People's
Republic of China was admitted and Taiwan was forced to abdicate its seat
to Beijing.

Breaking from Mainland Influence

Chiang died at 87 of a heart attack on April 5, 1975. His son, Chiang
Ching-kuo, continued as prime minister and was a dominant figure in the
Taipei regime. In April 1991, President Lee Teng-hui formally declared an
end to emergency rule, which had existed since Chiang's forces originally
occupied the island. In the first full election in many decades, the
governing Kuomintang in Dec. 1991 won 71% of the vote, affirming the
island's opposition to reunification with China. In Feb. 1993 the
president, himself a native Taiwanese, nominated Lien Chan, another
native, to be prime minister, marking a further generational shift away
from the mainland exiles.

In the island's first free presidential election, voters defied
mainland intimidation and gave 54% of the vote to incumbent president Lee
Teng-hui.

In 1998, Taiwan renewed its push for a separate UN seat—its sixth
attempt in recent years. The move has been blocked each time by the
Beijing government.

President Lee Teng-hui rankled mainland China by announcing in July
1999 that he was abandoning the long-standing “One China”
policy that had kept the peace between the small island and its powerful
neighbor and that he would from then on deal with China on a
“state-to-state basis.” China, which had vowed to someday
unite Taiwan with the mainland, retaliated by conducting submarine warfare
exercises and missile tests near the island in an effort to intimidate its
tiny brazen neighbor, as it had once before in 1996.

New President Brings New Beginning

In the March 2000 presidential race, voters elected pro-independence
candidate Chen Shui-bian of the Democratic Progressive Party, ending more
than 50 years of Nationalist rule.

Taiwan joined the World Trade Organization in Jan. 2002, just one day
after China gained entry. In August President Chen outraged China when he
asserted that Taiwan and China are separate countries and that a
referendum on independence for Taiwan is a “basic human
right.”

The day before the March 20, 2004, elections, President Chen Shui-bian
and Vice President Annette Lu survived an assassination attempt. Chen won
the election over Lien Chan by just 30,000 votes out of 13 million cast.
The country's first-ever referendum failed because less than 50% of
eligible voters weighed in on its questions. The referendum asked if
Taiwan should arm itself with additional defensive weapons if China does
not withdraw its missiles and if Taiwan should continue to negotiate with
China.

Heightened Tensions

Tension between China and Taiwan intensified in March 2005, when China
passed an antisecession law that said the country could use force if
Taiwan moved toward achieving independence. “The state shall employ
non-peaceful means and other necessary measures to protect China's
sovereignty and territorial integrity,” the legislation stated.
Taiwan president Chen Shui-bian called the bill a “law of
aggression.” Hundreds of thousands of Taiwanese took to the streets
to protest the bill.

In 2005, China met with several Taiwanese opposition leaders in an
effort to undermine Taiwan's defiant president. Lien Chan, who heads the
opposition Nationalist Party, traveled to China in April and met with
President Hu Jintao. It was the first meeting between Nationalist and
Communist Party leaders since 1949, when the defeated Nationalists
retreated to Taiwan. Lien called the visit a “journey of
peace.” In May, Hu met with another opposition leader, James Soong,
chairman of the People First Party. In a joint communiqué intended
to restart negotiations between Taiwan and China, they agreed to a
principle of “two sides of the strait, one China.”

President Chen tested China in February 2006, when he announced that he
was rescinding the National Unification Council, a group that was
established in 1990 to deal with reunification issues with China. He
stopped short of abolishing the council, saying, “Taiwan has no
intention of changing the status quo.”

In June 2006, Taiwan's legislature initiated proceedings to oust
President Chen because of allegations of corruption involving his family
and senior administration officials, but the motion failed later that
month. In November, prosecutors indicted Wu Shu-chen, the wife of
President Chen Shui-ban, charging that she spent $450,000 in public funds
on personal expenditures. Authorities also said that President Chen
submitted fake receipts when drawing from the same fund and lied about how
he spent the money.

Prime Minister Su Tseng-chang resigned in May 2007. President Chen
Shui-bian appointed Chang Chun-hsiung as his successor.

Independence Rejected

In parliamentary elections in January 2008, the opposition Kuomintang
soundly defeated Chen's Democratic Progressive Party, taking 81 out of 113
seats. President Chen resigned as head of the party. The result of vote
was considered a rejection of Chen's policy of edging toward independence
from China. Taiwan continued its move toward warmer relations with China
in March, when Ma Ying-jeou, of Kuomintang, prevailed over Frank Hsieh, of
the Democratic Progressive Party, 58.4% to 41.6%, in presidential
elections. Ma's victory ended eight years of Democratic Progressive Party
rule. Ma said he planned to pursue closer ties with China and spur
Taiwan's economic growth. Ma, however, does not favor political
reunification with China.

Ma reinforced his desire to pursue closer ties to mainland China in
June when he outlined his economic plan. He called for access to
China’s financial markets for Taiwanese businesses, regular
passenger flights and cargo passage across the Taiwan Strait, among other
proposals. He insisted, however, that China remove the short- and
medium-range missiles facing Taiwan before he will engage in peace talks
with China. Ma realized several of his goals in November, Chen Yunlin, the
head of the Chinese organization that negotiates with Taiwan, visited the
island, becoming the most senior mainland official to do so since 1949. He
met President Ma and signed several pacts that will lead to a signficant
increase in transportion and shipments of food between the two sides.

Political Leaders Stumble, Fall

Former president Chen, who lost a reelection bid in March 2008, was arrested
in November 2008 and charged with corruption and embezzling money from a state affairs fund. Chen, who
has long asserted that Taiwan and China are separate countries, denied the
allegations, claiming he was being persecuted to appease China. He was convicted of the charges and in Sept. 2009 was sentenced to life in prison.

In Aug. 2009, Typhoon Morakot caused a mudslide in a rural mountain village in southern Taiwan that buried schools, homes, and killed at least 600 people. Prime Minister Liu Chao-shiuan resigned in September amid withering criticism of the government's slow response to the typhoon and its failure to evacuate residents before the storm hit.

Taiwan and China Benefit from Trade Agreement

Taiwan and China signed the Economic Co-operation Framework Agreement, a landmark free-trade agreement in June 2010 that lifted or reduced hundreds of tariffs for both sides. Officials from both Taiwan and China described the deal as the most important achievement since the 1949 civil war. Taiwan seemed poised to benefit more economically from the deal than China, and China saw a political benefit as the agreement brings the two closer together.

On June 30, 2011, ex-president Lee Teng-hui was indicted on charges of embezzlement. Upon delivery of the 23-page indictment, the 88-year-old Mr. Lee, accused of siphoning $7.79 million from a National Security Bureau fund during his presidency, became the second Tawainese president to be charged with fraud.

President Ma Ying-jeou was re-elected in January 2012 in a close race with Tsai Ing-wen, who was Taiwan's first female presidential candidate. The business community breathed a sigh of relief when Ma won reelection. Taiwan's economy has prospered since the 2010 free-trade agreement with China and relations have thawed. However, not all Taiwanese have benefitted as house prices have soared and the income disparity has grown. Tsai's supporters expressed fear that Ma was getting too close to China.

On February 6, 2012, Sean Chen assumed office as the premier. Almost exactly a year later, Sean Chen stepped down due to health problems. In his one year as the premier, he faced severe public criticism, partly due to the country's difficult economic issues. He was replaced by Vice Premier Jiang Yi-huah.

High-ranking officials from China and Taiwan met in Nanking, China, in February 2014. It was the first time since the 1949 split that minister-level officials held talks. While the meeting was largely symbolic, it signalled that both sides want to maintain stability and develop warmer ties.

Fallout over Closer Ties to China and Poor Economy

Hundreds of protesters, mostly students, occupied Parliament in March, demonstrating against implementation of a service trade agreement with China. The deal is part of the controversial Economic Co-operation Framework Agreement Taiwan signed with China in 2010. Protesters said the trade agreement would hurt Taiwan's small businesses and give China further influence over Taiwan. They also objected to a lack of transparency in passing the agreement. President Ma defended the deal. "Regional economic integration is an unstoppable global trend. If we do not face this and join in the process, it will only be a matter of time before we are eliminated from the competition," he said. "For the sake of the nation's development, we truly have no choice."

Voters expressed their disappointment in the closer relations with China and its failure to improve Taiwan's stalled economy by voting against Kuomintang, the ruling party in the Nov. 2014 local elections. Premier Jiang Yi-huah took responsibility for his party's defeat. His cabinet resigned soon after the election. On Dec. 8, 2014, Mao Chi-kuo was named premier. Previously, he served as vice premier in Jaing Yi-huah's cabinet for almost two years.